The sale of Nortel Networks's wireless technology division to Sweden's LM Ericsson has had politicians, rival businesses and analysts in an uproar over the process and the potential loss of control of made-in-Canada technology.
Waterloo, Ont.-based Research in Motion complained that it was barred from bidding for the Nortel assets. New Democratic Party Leader Jack Layton argued the government should find a way to keep the assets in Canada. And analyst Carmi Levy said the sale called to mind the blocked sale of the space-technology division of MacDonald, Dettwiler and Associates — makers of the Canadarm — to a U.S. rocket maker.
The innovative work at the centre of the Nortel controversy is Long Term Evolution (LTE) telecommunications technology, the final step to a so-called fourth-generation standard for wireless devices.
What is LTE, and why has the potential sale of assets related to it angered rivals and nationalists alike? Here, we answer a few questions about a technology many are betting will revolutionize mobile telecommunications.
What is LTE?
Mobile phones have come a long way from their first appearance in the 1980s, when clunky cellular devices were good for voice calls but nothing else. And each time a major technological breakthrough occurs, the new phones and networks are said to be part of the "next generation."
Second-generation technology brought digital encoding of voice calls and early data exchange, starting with text messaging but branching out into email and web browsing.
GSM Short for Global System for Mobile communications, GSM is a wireless technology standard in use by about 80 per cent of the mobile phone market, including Rogers Wireless and its sibling brand Fido in Canada. The latest versions of GSM include 3G standards like high speed packet access (HSPA) and high speed packet access plus (HSPA+).
CDMA The name for wireless technology standards using code division multiple access technology, a method of sending information simultaneously over one communication channel. Phones using CDMA-based standards were popular in North America but didn't catch on in the rest of the world. Bell and Telus in Canada both use phone technology based on CDMA.
1G Analog, voice-only technology for cellular phones that was the standard in the 1980s. It was subsequently dubbed 1G after the introduction of second-generation mobile technology in the 1990s.
2G A mobile phone standard for encoding voice calls digitally and transmitting them through cellular networks. The first 2G networks were launched in 1991 in Finland. 2G phones also allowed for the transmission of data, beginning with SMS text messages. CDMA and GSM are considered 2G technologies.
3G The current standard for wireless devices in the developed world, 3G technology allows mobile phones to make voice calls and video calls and send data wirelessly, and to use speech and data services at the same time. 3G networks first appeared in 2001 and in Canada in 2005.
4G The next generation of mobile phone technology, expected to deliver broadband speeds to wireless communications. Long Term Evolution is often referred to as 4G, though technically it's the latest in 3G technology, and is sometimes referred to as 3.9G.
Third-generation phones like the latest iPhones and BlackBerrys brought faster speeds and better download and upload rates, making web browsing a less painful experience and leading to a raft of made-for-mobile applications.
Long Term Evolution represents the most advanced third-generation wireless technology, and its expected successor — dubbed LTE advanced — is the leading choice in the industry for the fourth-generation standard for mobile phones.
For consumers, LTE and future 4G phones represent the promise of broadband speeds on a mobile handset.
With download speeds of around 100 megabits per second, LTE-enabled handheld devices would in theory allow consumers to stream video, use Voice over IP applications and download music at speeds comparable to the best landline connections at greatly reduced prices from 3G phones.
How does it work?
LTE builds off previous wireless network technology, including the third-generation versions of competing technologies GSM and CDMA (see sidebar).
To send multiple streams of data, LTE uses a new method called orthogonal frequency division multiplexing, which splits the information into several narrow-band subcarriers, allowing each of them to carry a piece of the information more efficiently and reliably.
LTE uses a similar antenna technology to open up multiple paths to receive the same or different streams of information, allowing either faster speeds or a stronger signal.
Nortel said the technologies allow LTE networks to make more efficient use of wireless spectrum, providing between two to five times greater efficiency than 3G networks. This, in theory, will lead to reduced costs and lower prices for consumers.
Who is involved in LTE technology?
Nortel is not the only company involved in LTE technology. Nearly every major player in the wireless world — including Alcatel-Lucent, Ericsson, NEC and Nokia — is working on technology related to LTE.
In 2008, those four companies, along with NextWave Wireless, Nokia Siemens Networks and Sony Ericsson, signed an agreement to keep patent royalties on LTE technology down in an effort to spur quicker adoption of the technology.
And carriers around the world have begun to include LTE in their long-term plans. Canadian telecom giants BCE Inc. and Telus last year announced they were partnering to build a GSM network technology, called high speed packet access, on to their 3G CDMA network in an effort toward adopting an LTE network.
Rogers Wireless announced earlier this week it would be upgrading its network from HSPA to HSPA+ (or high speed packet access plus), increasing the top download rates for mobile phones from a maximum of 7.2 Mbps to 21 Mbps. The HSPA+ network technology is considered a further stepping stone on the road to LTE.
When is LTE coming?
Both Bell and Telus have targeted 2012 as when they expect LTE to be available, while Rogers, having just announced its HSPA+ upgrade, is not expected to launch LTE services for at least another year. Other carriers around the world are expected to launch their LTE services sooner. Japan's NTT DoCoMo announced on July 30, 2009, that it would launch its LTE network in December 2010.
What impact will Nortel's sale have on LTE innovation in Canada?
Although no single company has an edge in LTE technology, Nortel has been one of the leaders. The company provided the network for German telecom giant T-Mobile's demonstration of LTE at the Mobile World Congress in Barcelona in February 2009, the first time the technology was shown to an international audience.
Whoever acquires Nortel's wireless technology "is giving itself a very big leg up in terms of leapfrogging everyone else in the race to the next big thing in wireless," analyst Levy said.
Telecommunications consultant Johanne Lemay, who worked at Nortel for a decade, estimated about 600 Nortel patents licensed to Ericsson as part of the wireless-division sale were related to LTE. It's not known which of those patents, if any, might provide Ericsson an edge in developing its own LTE.
Lemay said Ericsson's move strengthens the Swedish company's position, as its own LTE investment has been substantial.
"Ericsson is already at the front of the line and a key supplier of LTE technology to Verizon, the largest U.S. mobile carrier," she said. "In buying the Nortel CDMA assets, Ericsson also removes one potential additional competitor from the LTE market, a likely beneficial move for future profit margins."
Some have worried the real loss to Canada will be the movement of future work on LTE and on later mobile telecom technologies to outside the country, leading to a brain drain of the top engineers to Europe that might undermine the ability of Canadian companies to compete in the wireless sector.
That process, however, had already begun after Nortel sought bankruptcy protection in January. Doug Wolff, the former vice-president and general manager of LTE at Nortel, left the company this year and now works for France-based Alacatel-Lucent as vice-president of its end-to-end LTE product management.
Yet Ericsson has committed to bringing aboard 2,500 Nortel employees from the CDMA and LTE business, of which about 2,000 work on LTE. Many of the engineers behind the technology work from Nortel's Ottawa campus.
Lemay said Ericsson already contributes to research and development in Canada with operations in Montreal, Toronto and Vancouver, and said she hopes that commitment can continue with its potential Nortel acquisition.
In 2008, Ericsson Canada Inc. ranked 14th in research and development spending in Canada, outlaying $147 million, or 23.2 per cent of revenue, according to independant analyst Research Infosource's annual list.
That number pales in comparison to Nortel's research investment, however, which was over $1.85 billion last year.